Investors hit the brakes on resources projects

https://i2.wp.com/resources0.news.com.au/images/2012/11/28/1226526/095052-121129-n-projects.jpg

Adam Creighton
From: The Australian
November 29, 2012 12:00AM

RESOURCES investors are increasingly scrapping tentative investment plans and cost blowouts are artificially inflating Australia’s resource pipeline, a new report reveals.

Although the total value of committed resource projects rose a little to $268 billion in October, the number of committed projects fell to 87 from 98 six months earlier, the Bureau of Resources and Energy Economics said yesterday in its six-monthly update of Australia’s investment pipeline.

“The increase is primarily a result of the approval of a second train for the Australia Pacific LNG project and cost increases to projects that were already under way,” the bureau said.

Eleven “mega projects”, costing more than $5bn each — mainly liquefied natural gas facilities such as the Gorgon, Ichthys and Wheatsone projects — account for three-quarters of all committed investments.

Only 10 projects worth $13.2bn progressed to the “committed stage” of development, compared with 21 projects worth $45bn in the six months to April.

“Even on the most conservative estimate provided by the bureau, the total potential investment in the resource sector sits at a mammoth $650bn,” Wayne Swan said, pointing out the OECD’s remarks earlier this week that mining in Australia should “continue to expand vigorously” next year, based on current plans.

The bureau said the total committed expenditure on Australia’s oil and gas projects was “comparable to the total cost of the Apollo moon program in 2012 prices”.

But concerns about the longevity of Australia’s resource boom, which intensified earlier this year after BHP’s decision to shelve its multi-billion-dollar Olympic Dam project in South Australia, and Fortescue Metals Group’s decision to retrench 1000 workers in Western Australia, are still worrying investors, who cancelled 18 projects in the very preliminary stages of development in the six months to October.

“The decrease in the number of projects is attributable to the removal of projects that have not progressed as scheduled and because information could not be sourced that confirmed a clear intention to progress to development,” the bureau said.

Nevertheless, more than 170 projects worth about $290bn — mainly coal and gas projects slated for Queensland — remain in the “feasibility stage”, having passed commercial viability tests.

“Due to restrictions on exploration and production, there have been few uranium projects progressing along the investment pipeline,” the bureau added, although it pointed to regulatory changes that should improve their prospects.

Separate data from the Australian Bureau of Statistics showed the value of construction completed over the three months to September rose 1.7 per cent to $51.3bn, and increase underpinned almost entirely by engineering construction work.

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Posted on December 3, 2012, in Australia, AUSTRALIA - OCEANIA and tagged , , , , , , , , . Bookmark the permalink. Comments Off on Investors hit the brakes on resources projects.

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